• A quarter of BNPL users are concerned about their ability to repay their BNPL bills
• Over a third chose to pay with BNPL due to insufficient funds in their current or savings account
• Nearly a fifth of 18–34-year-old BNPL users have had their credit score impacted due to missed BNPL payments
• The average BNPL user is paying off £293 in BNPL loans, and almost half have had loans from different BNPL providers at the same time
• As HM Treasury considers industry responses to its consultation on BNPL regulation, Barclays research shows why consistent and tougher regulation of the sector is needed to protect consumers from spiralling debt

Barclays is calling for more robust regulation of all buy-now-pay-later products as new research suggests the lack of consistent affordability assessments among short term interest-free credit providers has led shoppers to take on more debt than they can afford to repay*.

Consumers are taking out unregulated BNPL contracts when they’re not in a financially stable position to do so, with new research revealing that a quarter (24 per cent) of BNPL users are concerned about their ability to repay their BNPL bills. This figure rises to over a third (34 per cent) among 18–34-year-olds. A further three in 10 (31 per cent) are overwhelmed by the amount coming out of their account in BNPL bills.

When lending is regulated, robust affordability assessments are required on a customer’s personal financial circumstances before the loan is approved. This helps ensure that the customer is only borrowing what they are comfortably able to pay back.

One of the pitfalls of unregulated lending is that these thorough affordability checks are not required, and are therefore not always carried out. As a result, customers may be less likely to have sufficient funds available to pay back borrowing on time.

Barclays’ research highlights that this lack of regulation can lead to irresponsible lending, with people taking out BNPL contracts when they have been rejected by the regulated alternatives.  More than a third (35 per cent) of BNPL users admit that they chose to pay with BNPL because they had insufficient funds in their current or savings account to pay for their purchase, and 10 per cent say it was because their applications for a credit card had been rejected. Of particular concern, almost a quarter (23 per cent) of 18–34-year-old BNPL users have had to reduce their spending on essential purchases like groceries, in order to keep up with their BNPL repayments.

The research suggests that one of the reasons for mounting BNPL payments taking shoppers by surprise is the relative ease with which they can accrue debt across multiple providers, with almost half (47 per cent) of BNPL users admitting that they have had BNPL loans from different providers at the same time. Of those, three in five (60 per cent) say they have had three or more concurrent BNPL providers. The average BNPL user is currently paying off £293 in BNPL loans.

This highlights another drawback of the current regulatory framework, which is that unregulated short-term, interest-free credit providers are not currently required to report loans to the Credit Reference Agencies, which means that a customer’s monthly BNPL repayments are not always visible to other credit providers to factor into their own affordability assessments. This can result in further credit being extended to a consumer already struggling with debt, compounding the problem.

More broadly, the research demonstrates that there’s still a knowledge gap that needs to be addressed, with one in 10 (11 per cent) BNPL users believing that if they missed a payment, it wouldn’t affect their credit score. This is despite nearly a fifth (18 per cent) of 18–34-year-old BNPL users admitting they have had their credit score impacted due to missed BNPL payments.

The research also suggests that the frictionless nature of BNPL as a way to pay encourages shoppers to overspend with three in 10 (30 per cent) BNPL users between 18 and 34 saying the availability of BNPL has made them shop without thinking, because it’s so easy to buy something in the moment and worry about repayments later. Overall, 30 per cent of shoppers have said they regret using it because they have bought more than they can afford to repay. This number rises to 44 per cent among 18-34 year olds.

Antony Stephen, CEO of Barclays Partner Finance, said: “It’s essential that the new rules around BNPL regulation are fit for purpose and protect consumers from spiralling debt. Our research identifies the shortcomings of unregulated short-term interest-free credit options and highlights that people are still not clear on the repercussions of not making repayments. Barclays believes all consumer credit products should be subject to the same level of regulation, to avoid an unnecessary two-tier regulatory framework that goes against the best interests of consumers.”

“Many of the UK’s largest retailers choose Barclays as their finance partner because they share our views on the importance of putting customer outcomes ahead of short-term profits. That’s why we’re calling for more consistency in the regulation, with a common framework applying to all consumer credit products, and we are hopeful that HM Treasury’s review will deliver this.”

Barclays Partner Finance has been providing regulated point-of-sale lending products and services for many years, offering interest-free and interest-bearing loans at the point of need over a range of lending periods. For example, in December the company extended its partnership with Amazon to enable customers to pay in instalments on purchases of £100 or more on amazon.co.uk.

This new, flexible payment method, Instalments by Barclays, is a fully-regulated lending option where Barclays carries out full credit and affordability checks, to ensure consumers are only borrowing what they can afford.

As a responsible lender, Barclays treats all BNPL-type lending as regulated, even where the product may fall within the definition of unregulated BNPL, because we believe it’s in the best interests of consumers.